Hey so there’s an LP on Beefy, OP-USDC.
As the AMM formula churns away wouldn’t the actions be: taking profits and selling OP when it rises and buying low by buying OP when it falls.
This seems like an automated way to perform good trading practices.
This would also make the IL irrelevant.
What do you think?
8 thoughts on “LP automatically sells high?”
IL is just that you sold high but then price moved higher, now you’ve sold low.
A key point is that what OP an AMM sells at price X on the way up, it buys at price X on the way down. Its not really buying high and selling low as much as buying the falling asset and selling the rising asset.
AMMs are most profitable natively (not including external token rewards) when they have high volume with low volatility to earn swap fees. If you deposit at price X and exit at price X than you have the same principal value + any fees accumulated for the duration of your deposit.
That’s exactly what IL is though? Except it happens in a continuous manner rather than one discrete trade.
Use tarot for auto compounding that pool. Tarot take a fraction of the fees beefy does
I think of BTC-Usdc lp as a fractional leverage on BTC while earning fees. 0.5<Leverage<1.
I got the OP second airdrop and I think I would just try to use it for this LP. First I’m on ORE/ETH LP but there’s no way to make IL irrelevant. Though both token pairs are good to hold.
Are they using the Arrakis vault? I know Arrakis has automated pools that they deployed to optimism recently.
LP positions actually do the exact opposite of this. If you deposit any 2 assets and one of them goes down 90% relative to the other you are stuck with MORE of the loser. And if one of them goes up by 90% relative to the other then you are stuck with LESS of the winner.
The only DEX that facilitates true “buy low/sell high” is Carbon DeFi.
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